Many years ago, in the formative years of my career, this was one of the sage pieces of advice given to me. In truth, this goes against all the idealism that was poured into me in my tender youth. :)

However, there is some truth to this and it's important to reconcile with it in your efforts to constantly increase the economic exchange that happens as you work through the lifecycle of your customers. Let me illustrate with a few examples:

  • People with diabetes need to manage their blood-sugar levels and may need help with getting enough insulin. What they want is that honking piece of chocolate cake, a milk shake to go and a 64 ounce Coke at the convenience store on their way to work. What do you think is selling at the local stores? Little sweet goodies or glucose strips? Oh, I know, this is an example to the extreme but stick with me.
  • Companies need to cut costs, but what they want is to take market share from the competition so they buy up companies, invest in new product lines and chase the top line, sometimes at the expense of good, profitable business.
  • Kids in America - and around the world - need shoes. A good pair of shoes that will protect their feet and help them walk right. What they want is the latest Air Jordan's, or maybe a nice pair of pumps from Gucci will do the trick.
  • Etc., etc... you get the picture.
When it comes to marketing, it's really important to know what "moves the needle"; you know that ever present top line of revenue and the bottom line of profit. With that in mind, here are three things that will drive your business:
  1. Know your "cost of acquisition." This is what you spend to acquire a new customer. Not a lead. Not a new opportunity. This is someone or some company that gives you money in exchange for your product or service. Customers spend money.
  2. Know your conversion point. This is the point at which a new customer makes a "2nd purchase." Now it may not be the 2nd purchase, it might be the 7th trade or it might be the first renewal contract, but what it is, is the key leverage point that predicts whether or not that customer will stay with you year after year after year. Think of this as the key profitability metric.
  3. Know your retention rate. This could be year over year or it might be at 90 days. The important point is to know the lifecycle of your customer and to know when they have been "retained" and are driving the profits of your company. It is not uncommon for 20% of your customers to deliver 80% of company revenue and profits. These are "retained" customers and you need to know at what point their behaviors highly profitable for your company.

In my former days of publishing, one of the "rules of thumb" taught to me was this: Lose money on Acquisition. Break-even on Conversion. Make money on Retention. Take a look at your customer base and see if this doesn't hold true for your company.